BILL NUMBER: SB 248	CHAPTERED  09/07/99

	CHAPTER   345
	FILED WITH SECRETARY OF STATE   SEPTEMBER 7, 1999
	APPROVED BY GOVERNOR   SEPTEMBER 7, 1999
	PASSED THE SENATE   AUGUST 24, 1999
	PASSED THE ASSEMBLY   AUGUST 19, 1999
	AMENDED IN ASSEMBLY   JULY 12, 1999
	AMENDED IN SENATE   APRIL 29, 1999

INTRODUCED BY   Senator Lewis

                        JANUARY 27, 1999

   An act to amend Sections 18210, 18321, and 18437 of, and to add
Section 18003.7 to, the Financial Code, relating to industrial loan
companies.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 248, Lewis.  Industrial loan companies.
   Existing law permits an industrial loan company to make loans, and
to acquire or discount obligations having a term in excess of 7
years secured solely or primarily by real property, as specified,
provided that all of the loans and obligations in excess of 7 years
do not exceed in the aggregate 70% of its total assets.
   This bill would delete that authority.
   Existing law prohibits an industrial loan company from receiving
deposits.
   This bill would specify that the prohibition pertains only to
demand deposits, as defined.
   Existing law authorizes an industrial loan company to make loans
to, or to purchase any obligation from, persons who do not reside or
have a place of business in this state not to exceed 20%, in the
aggregate, of a company's total assets.  Upon application and
approval of the Commissioner of Financial Institutions, the company
may increase its loans to, or purchases of obligations from, those
persons to not exceed 40%, in the aggregate, of the company's total
assets.
   This bill would increase those percentage levels to 25% and 50%,
respectively.  It would also, with respect to certain application
requirements, require additional information, as specified.
   A willful violation of the Industrial Loan Law is a crime.  In
expanding the provisions of that law with respect to certain
application requirements, the bill would enlarge the scope of that
crime and impose a state-mandated local program.
  The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state.  Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 18003.7 is added to the Financial Code, to
read:
   18003.7.  "Demand deposit" means investment or thrift certificates
in account, passbook, or certificate form which are redeemable and
payable upon demand to the owner.
  SEC. 2.  Section 18210 of the Financial Code is amended to read:
   18210.  (a) Except as provided in Sections 18205.5 and 18209 and
subject to subdivision (b) and (c), an industrial loan company shall
not make any loan or purchase or discount any note secured primarily
by real property unless the loan or other obligation is repayable in
substantially equal weekly, semimonthly, monthly, or quarterly
installments during its term, which shall not exceed 30 years and 30
days from the date the loan or other obligation is made or acquired
by the company.  Equal installment requirements shall not apply to
adjustable or variable rate loans or obligations made or purchased by
the industrial loan company in accordance with Title VIII of the
Garn-St. Germaine Depository Institutions Act of 1982 and any
applicable regulations, guidelines, and policies adopted thereunder.
However, an industrial loan company may make loans secured by first
trust deeds on real property containing single family, or one to four
residential, units provided that the repayment period for each loan
does not exceed 40 years and 30 days from the date the loan is made
by the company.  All loans with repayment periods in excess of 30
years and 30 days shall not exceed in the aggregate 5 percent of all
outstanding loans and obligations of the company.
   (b) Any consumer loan or any purchase or discount of any consumer
obligation having a term in excess of three years from the date the
loan or other obligation is made or acquired by the company shall be
secured solely by real property or solely by personal property.
However, if the original principal amount of the consumer loan or
obligation is twenty thousand dollars ($20,000) or more, then the
loan or obligation shall be secured solely by real property or solely
by personal property, or by both real property and personal
property.  All loans and obligations made and purchased pursuant to
this subdivision shall be repayable in installments and within a term
not to exceed the limitations set forth in subdivision (a), except
that consumer loans or obligations secured solely by personal
property shall have a term not to exceed the term provided for in
Section 18205 and except as otherwise may be provided for in Sections
18207, 18208, and 18209.  The equal installment requirements set
forth in subdivision (a) shall not apply to loans or obligations made
or purchased by the industrial loan company in accordance with Title
VIII of the Garn-St. Germaine Depository Institutions Act of 1982
and any applicable regulations, guidelines, and policies adopted
thereunder.
   (c) In order to ensure the safety and soundness of industrial loan
companies and to avoid an unreasonable concentration of loans and
obligations that could result in balloon payments, all loans and
obligations with a term in excess of 15 years and 30 days shall be
repaid in substantially equal weekly, semimonthly, monthly, or
quarterly installments during their term.
  SEC. 3.  Section 18321 of the Financial Code is amended to read:
   18321.  (a) Nothing in this division authorizes an industrial loan
company to receive demand deposits.
   (b) Subject to Section 18315, an industrial loan company that is a
member of the Federal Deposit Insurance Corporation pursuant to
Section 18521.5 may use the term "certificate of deposit" as defined
in Section 18003.6 with respect to an investment certificate that
does not authorize either of the following:
   (1) Redemption prior to its maturity.
   (2) Reduction of the interest rate payable thereon other than a
variable interest rate.
  SEC. 4.  Section 18437 of the Financial Code is amended to read:
   18437.  (a) Except as provided in subdivision (b), an industrial
loan company shall not make loans to, or purchase any obligations
from, persons who do not reside or have a place of business in the
State of California, unless those loans or obligations comply with
all of the following conditions:
   (1) If the loan or obligation is unsecured, then only if the loan
or obligation bears the unqualified written guaranty of a financially
responsible person, considering the amount of the obligation, who
resides or has a place of business in the State of California.
   (2) If the documents and security for the loan or obligation and
all records relating to the transaction are in California at the time
the loan or obligation is made or acquired and are thereafter kept
in California while the loan or obligation remains unsatisfied,
except that where the security is aircraft, the security need not be
in California at the time the loan or obligation is made or acquired,
nor need it thereafter be held in California while the loan or
obligation remains unsatisfied.
   (b) Notwithstanding subdivision (a), an industrial loan company
may make loans to, or purchase any obligations from, persons who do
not reside or have a place of business in the State of California not
to exceed 25 percent, in the aggregate, of an industrial loan
company's total assets.  Upon application to and approval by the
commissioner, an industrial loan company may increase its loans to,
or purchases of obligations from, persons who do not reside or have a
place of business in this state not to exceed 50 percent, in the
aggregate, of an industrial loan company's total assets.  The
application shall include all of the following information:
   (1) A description of the company's proposed plan of business.
   (2) The character, business qualifications, and other experience
of the proposed officers and managers directing the line of business
for which authorization is requested.
   (3) Any other facts and circumstances bearing on the proposal
that, as determined by the commissioner, may be relevant.
   (c) This section does not apply to loans made to, or acquired
from, persons who do not reside or have a place of business in this
state if all of the following conditions are met:
   (1) The loans are for the purchase or refinance of single- or
multi-family residential property or nonresidential property.
   (2) The loans are salable in the secondary market as evidenced by
commitments to buy by a buyer in the secondary market.
   (3) The loans are owned by the industrial loan company for 90 days
or less.
  SEC. 5.  No reimbursement is required by this act pursuant to
Section 6 of Article XIIIB of the California Constitution because the
only costs that may be incurred by a local agency or school district
will be incurred because this act creates a new crime or infraction,
eliminates a crime or infraction, or changes the penalty for a crime
or infraction, within the meaning of Section 17556 of the Government
Code, or changes the definition of a crime within the meaning of
Section 6 of Article XIIIB of the California Constitution.
